Re: I have a 115% mortgage on a 3 Year Arm...is there hope?[ Edited ]
08-16-2007 10:49 AM - edited 08-16-2007 10:55 AM
I'm going to suggest something that may shock you and may offend others on this board.
If your goal is peace of mind, you may need to see a bankruptcy attorney. In my own opinion, it appears that you have too much debt. If you can't make substantial payments towards paying off your credit cards now, what are you going to do when the inevitable "life happens" happens? In this economy, there's a very real chance that you or your wife will lose your job (or lose any "bonuses" that you may get from your job). For example, you could be in a car accident and be out of work for a while and, with the economy being what it is, your employer could decide that it was cheaper for it to just let you go. And if you do manage to keep your job, the medical bills are going to put a serious dent in your budget. If you are going to struggle to meet all of your payments and worry every time the phone rings thinking that it is a creditor, only to be in the same position in two or three years, why put up with all of that stress? Why risk your mental and physical health if there is no way out?
And, I'm telling you, there is no way out for at least 12 months and probably much longer. I've been saving my money for a while in hopes of buying a home. I'm not ready to buy yet -- waiting until December or January. But I went on line yesterday to Countrywide to find out what it would cost to get into a home. For a $120,000 mortgage (modest, right?), Countrywide wants to see $15,000 in your savings account: preclosing costs, downpayment, closing costs, and "extra" in reserves. I imagine that any lender would require the same kind of "cash reserves" before refinancing. The days of "no down payment or closing costs" are gone for at least another decade.
All of the people who are defaulting on the subprime market were in the same boat you are in. Some of them were doing ok but had a sudden job loss or medical problem (or divorce) that pushed their budget over the edge. Many of them were encouraged to get into a home with an ARM (or a low fixed rate that turned into an ARM) and then were told to refinance before the ARM kicked in -- the only problem is that they can't get refinanced because (a) their house isn't appraised for what is owed or (b) they can't find a lender to refinance at their current credit level. I have a friend in just this situation -- his ARM kicked in and he has to pay 1.5x what he was paying each month and next year his payment goes up to 2x what he was first paying (doubling his mortgage), but he can't get a refinance because housing prices have declined and the appraisal is lower than his mortgage. He's really stuck between a rock and a hard place. The lender will refinance, but only if he can come up with the extra $15,000 that stands between the appraisal and the mortgage that he's refinancing.
More than likely, that's kind of where you are...between a rock and a hard place. You probably don't have any (or very little) emergency funds, so the first time the car breaks down and you don't have the $2,000 to get it fixed (because your credit cards have been cut off), then you can't get to work, then you lose your job, etc., etc., etc. Life happens. Life comes at you. When you least expect it to do so.
With the amount of credit card debt you are carrying and the overload you are carrying on your mortgage, you are under a lot of stress. Stress that can harm you mentally and physically and affect every relationship in your life (your marriage, your kids, your co-workers, etc.). You have to ask yourself if it is really worth it. And you have to keep trying to get a refinance (but even that can be very stressful -- rejection is not a good thing to experience.)
So, do the normal things: DO NOT MISS A HOUSE PAYMENT. PAY AT LEAST THE MINIMUM ON YOUR CREDIT CARDS (if possible; otherwise, pick one or two and make the minimum payment on those and let the others suffer). TRY TO SET ASIDE SOMETHING FOR AN EMERGENCY FUND. And go to see a bankruptcy attorney to find out if this might be a viable option for you. You don't have to declare bankruptcy, but it would be financially prudent to at least go talk to one to find out what your options may be (and they do vary from state to state). Go see one today just so you can get a handle on your situation.
PS: TRUST ME, I WORK IN THE FINANCIAL SERVICES SECTOR: THE ECONOMY IS MUCH WORSE THAN THE MEDIA IS LETTING ON. MUCH WORSE.
Message Edited by hopeful on 08-16-2007 10:55 AM